Problem $13-24($Algo$)$ Special Order Decisions $[$LO$13-4]$

Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell $36,000$ Rets per year. Costs associated with this level of production and sales are given below:

Unit Total

Direct materials $ $20$ $ $720,000$

Direct labor $10360,000$

Variable manufacturing overhead $3108,000$

Fixed manufacturing overhead $9324,000$

Variable selling expense $4144,000$

Fixed selling expense $6216,000$

Total cost $ $52$ $ $1,872,000$

The Rets normally sell for $$57$ each. Fixed manufacturing overhead is $$324,000$ per year within the range of $27,000$ through $36,000$ Rets per year.

Required:

Assume due to a recession, Polaski Company expects to sell only $27,000$ Rets through regular channels next year. A large retail chain offered to purchase $9,000$ Rets if Polaski will accept a $16\%$ discount off the regular price. There would be no sales commissions on this order; thus, variable selling expenses would be slashed by $75\%.$ However, Polaski Company would have to purchase a special machine for $$18,000$ to engrave the retail chain$$s name on the $9,000$ units. Polaski Company has no assurance that the retail chain will purchase additional units in the future. What is the financial advantage $($disadvantage$)$ of accepting the special order?

Note: Round your intermediate calculations to $2$ decimal places.

Refer to the original data. Assume Polaski Company expects to sell $27,000$ Rets through regular channels next year. The U$.$S$.$ Army would like to make a one$-$time$-$only purchase of $9,000$ Rets. The Army would reimburse Polaski for all of the variable and fixed production costs assigned to the units by the company$$s absorption costing system, plus it would pay an additional fee of $$1\mathrm{.}60$ per unit. Because the army would pick up the Rets with its own trucks, there would be no variable selling expenses associated with this order. What is the financial advantage $($disadvantage$)$ of accepting the U$.$S$.$ Army's special order?

Assume the same situation as described in $(2)$ above, except the company expects to sell $36,000$ Rets through regular channels next year. Thus, accepting the U$.$S$.$ Army$$s order would require giving up regular sales of $9,000$ Rets. Given this new information, what is the financial advantage $($disadvantage$)$ of accepting the U$.$S$.$ Army's special order?